The size of Saudi Arabia’s debut international sovereign bond outdid all expectations, with the $17.5bn offering becoming the largest ever emerging market issue, the Financial Times reported. Investor demand was extremely strong, with a total order book of $67bn coming from various regions of the world, but especially from Asia.

The bond issuance was composed of three tranches of various maturities. The yield on the five-year bond offering was 2.6%, on the 10-year bond offering was 3.41%, and on the thirty-year bond offering was 4.63%. The Saudi bonds were priced about 40 basis points above neighboring Qatar’s $9bn sovereign issue earlier this year.

The plunge in oil prices over the past couple of years has pushed oil revenue dependent Gulf governments to turn to the international debt market to finance large budget deficits. Saudi Arabia plans to use the proceeds of the bond issue to partly finance a SAR326bn ($87bn) projected budget deficit in 2016, equivalent to 13% of GDP.

In the era of low oil prices, the Saudi government is responding to projected budget deficits by adopting a fiscal consolidation plan as part of its National Transformation Program 2020. Non-oil revenues are to rise to SAR530bn by 2020 from SAR163.5bn currently. The public sector wage and salary bill is to be cut to SAR456bn, down from SAR480bn. Accumulative domestic and foreign public debt is forecasted to rise to 30% of GDP from 7.7%.

The Saudi debut sovereign notes was assigned a provisional "A1" rating by Moody’s Investors Service in line with that of the sovereign. While Saudi Arabia enjoys an "A-" sovereign credit rating from Standard and Poor’s as well as an "AA-" sovereign credit rating from Fitch Ratings.

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